Not the right time to raise interest rates, says Governor of the Bank of England

20 January 2016

Yesterday the Governor of the Bank of England, Mark Carney, delivered the annual Peston Lecture 2016, which marked the 50th anniversary of QMUL's School of Economics and Finance. The annual Peston Lecture was held in honour of economist Lord Maurice Peston, founder of the School of Economics and Finance at QMUL.

The Governor said that now is not the time to hike interest rates. Mr Carney said that plummeting oil prices and an uncertain global environment meant that "tighter monetary policy was not yet necessary".

The news will come as a welcome relief to mortgage holders but will disappoint savers, who have struggled with rock bottom interest rates since the financial crisis of 2007-08.

Mr Carney said: "In my view the decision has proved straightforward. Now is not yet the time to raise interest rates."

In a downbeat assessment of the global economy he warned that the UK may be "buffeted" by shocks from China and other developing countries.

"That means we will do the right thing at the right time on rates." said Mr Carney.

Mr Carney said that he will consider raising rates only when economic prospects improve. He said that three specific factors will act as a guide to when interest rates may rise.

First, that economic growth in the UK would be higher than the average trend. Second, that wage growth increases and productivity improves. Third, that inflation starts to approach the target rate of two per cent.

He said that while these factors are a guide, "the journey doesn’t have a set timetable, only a direction of travel".

The Lecture provoked quite some reactions on financial markets and the exchange rate dropped as soon as Carney reiterated that the Bank of England will not raise interest rates anytime soon. As a result, many major newspapers covered the lecture and Queen Mary featured highly in national and international news: